Analysis: Emanuel victory humbling today — with headaches tomorrow

Mayor Rahm Emanuel has told associates he wants to “hit the re-set” button in a second term to rebuild strained and soured relationships that may have cost him politically.

He’ll have to do plenty of rebuilding to shore up his diminished clout.

After being forced to fight so hard and raise so much to defeat Jesus “Chuy” Garcia, an under-funded and relatively unknown third choice of the Progressive movement, Emanuel’s once-legendary political muscle has atrophied.

He’s weakened at a time when maximum clout is needed to fend off Gov. Bruce Rauner’s doomsday budget cuts and tackle Chicago’s $20 billion pension crisis and the $10 billion in unfunded pension liabilities at the Chicago Public Schools.

“The fact that he was forced into a runoff diminishes him. I don’t think he’ll ever get that back. He’ll have more headaches, have to jump through more hoops and be forced to soften some of his positions,” said a veteran political operative, who asked to remain anonymous.

Runoff victories by aldermanic candidates bankrolled by the Chicago Teachers and SEIU, Garcia’s chief backers, also mean Emanuel is likely to be confronted by an energized City Council with a bigger Progressive Caucus.

Even aldermen who were among the mayor’s most loyal first-term supporters are likely to be more vocal and less of a rubber-stamp for Emanuel, who is likely to call it quits after a second term.

The bottom line is that the exhausted winner of Tuesday’s runoff has work to do before he gets to work on the herculean task of pulling Chicago away from the fast-approaching financial cliff.

“He will be more effective for the lessons he’s learned in this campaign. He certainly got a strong message about — not only his strengths, but his weaknesses,” said David Axelrod, Emanuel’s friend of 30 years who served together with the mayor in the Obama White House.

“If he’s smart, he’ll take that to heart and be more inclusive, more sensitive to various points of view. It doesn’t mean you should yield to every point of view or be paralyzed by differences. But people need to be included in the process.”

Another mayoral ally, who asked to remain anonymous, said Emanuel can take advantage of the “opportunity to reset,” only if he’s willing to change his scripted Washington ways.

“Start by meeting with the press more often. Be out in the community more often. Let people see you. Let them vent. He can’t go back into the bunker. He’s got to change the way he operates. There’s no other option but to engage,” the mayoral confidante said.

“He’s a get-it-done guy who’s used to getting things done by twisting arms. But that won’t cut it anymore. He’s done a lousy job of telling his own story. When people hear from him more directly, he won’t be as defined by others filling that vacuum.”

More than anything, Emanuel defeated Garcia by convincing voters he was better prepared to tackle Chicago’s daunting financial challenges.

Now comes the hard part: delivering on Emanuel’s own plan to solve the combined, $30 billion pension crisis, which is heavily reliant on the Illinois General Assembly and on union givebacks.

The mayor wants an elusive, publicly owned Chicago casino with all of the revenue used to shore up city and school pensions. He wants to resurrect his 2011 proposal to broaden the sales tax to an array of services not now covered, but needs to find a way to do that without hammering everyday services such as haircuts.

And he wants the Legislature to lift the hammer hanging over Chicago taxpayers — a state-mandated, $550 million payment due in December to shore up police and fire pensions — and give taxpayers more time to “ramp up” to that balloon payment, with similar relief from payments to the teachers pension fund.

On the reform side, the mayor has said he would enter talks with police and fire unions with “five core principals”: phasing in higher taxpayer contributions; reining in cost-of-living increases for retirees; maintaining the current retirement age; “gradually increasing” employee contributions by roughly $300 more-a-year and exempting retirees with annual annuities of $22,000 or less.

If lawmakers, union leaders or the courts don’t go along, Emanuel will have no choice but to do what one of his most powerful City Council supporters has called inevitable: raise property taxes.

After four straight years of up-to-the-limit property tax increases for schools, he might even be forced to ask Springfield for permission to lift the property tax cap so he can go above it.

“He’s gonna have to push every lever he can to get help from Springfield to fill these holes and go through a process with every labor group. That is going to require shared sacrifice,” Axelrod said.

The financial crisis at Chicago Public Schools was made worse by Emanuel’s hand-picked school board. They balanced the budget by counting on 14 months of property tax revenue in just 12 months.

The accounting sleight-of-hand leaves just 10 months of property tax revenue for this year’s budget, when the shortfall balloons to $1.14 billion, thanks to a state-mandated, $700 million payment to the teachers pension fund.

Emanuel has offered no solution to the school budget crisis. He has only appealed to Rauner to end the pension double-standard that forces Chicago taxpayers to pay twice — for retired city teachers and for the pensions of retired teachers outside the city.

Against that backdrop and the $9.5 billion teacher pension crisis, Emanuel must negotiate a new teachers contract and pension reforms with a teachers union that persuaded Garcia to enter the race and bankrolled his campaign.

Chicago Teachers Union President Karen Lewis, whose brain cancer diagnosis forced her to take a pass on the mayor’s race, has promised to lead her members out on strike for the second time in three years if teachers don’t get a fair contract.

Garcia has flat-out predicted another teachers strike, after accusing the mayor of instigating the last one with his “confrontation” tone and bullying missteps.

But Axelrod predicted that his friend would not make the same mistake twice.

“That was not a flawless exercise by him. He was new. There was a learning curve. He’ll bring that knowledge to this process and, whatever antagonism there was during the campaign, I don’t think he’ll bring that to table. There’s too much at stake,” Axelrod said.

“It’ll be sticky, hard and tough. But I wouldn’t pre-ordain that it’s going to end in some huge new confrontation. The job of the teachers union is to bargain aggressively for its members. It’s not the job of the teachers union to create an endless state of siege.”

In a pre-election interview with the Chicago Sun-Times, Emanuel ruled out bankruptcy — either for the city or the public schools.

But his ability to avoid bankruptcy may well be in the hands of the courts.

In a friend of the court brief filed in the state pension case, Corporation Counsel Stephen Patton warned that Chicago faces a $300 million deficit in 2016 with shortfalls continuing “for the foreseeable future”— even before piling on the pension liabilities that have dropped the city’s bond rating to just two levels above junk status.

And if state legislation that saved two of four city employee pension funds is overturned, Patton warned that a “catastrophic outcome” awaits retirees and taxpayers alike.

“The city’s liabilities will increase by $2.5 million a day. The city will suffer further downgrades that could materially increase the cost of borrowing money essential to funding basic operations. And it could make the city immediately liable to pay hundreds of millions of dollars as a result of default and early termination of debt-related obligations,” Patton wrote.

Emanuel initially proposed raising property taxes by $250 million over five years to bankroll the city’s increased contribution to save the Municipal Employees and Laborers pension funds.

He agreed to substitute a 56 percent increase in Chicago’s telephone tax for the city’s first-year contribution, only after then-Gov. Pat Quinn balked at a pre-election property tax hike.

Now that he’s been re-elected, Emanuel must decide how to meet the city’s increased obligations to the two funds going forward, when the telephone tax will fall short, and hope the Chicago pension reform bill is not overturned.

Same goes for his plan to phase out Chicago’s 55 percent subsidy for retiree health care. If the phase-out is overturned, the operating shortfall gets $108 million worse.

If Rauner’s doomsday budget passes, Chicago’s share of the state income tax will take a $135 million hit. The CTA will be forced to raise fares and cut service after losing $133 million. The teachers pension fund will lose $62 million. And social services will be decimated.

If Emanuel can somehow manage to steer the ship of state around all of those icebergs, he will have secured his legacy. The runoff that weakened him politically will become a distant memory.

“Nobody ever asks the day after the election what was the percent? You move on and — whoever wins, no matter how close — has got the responsibility and the power to implement their programs,” said former White House chief of staff Bill Daley, the brother of former Mayor Richard M. Daley.

Daley, who served as Al Gore’s field general in the notorious Florida recount, added, “George Bush won by 500 votes in Florida and lost by almost 1 million popular votes. He started to govern and it didn’t affect his majority in Congress or impact his ability to get things done in a serious way.”